CS Executive · Corporate Accounting and Financial Management · Accounting Standards
A company's policy for valuing inventory is stated in a note to its accounts. Which statement about the disclosure of accounting policies under AS 1 is correct?
Under AS 1, the significant accounting policies adopted in preparing and presenting the financial statements should be disclosed together in one place as part of the financial statements. Placing them only in the directors' report or scattering them does not meet the requirement, nor does omitting unchanged policies.
- ASignificant accounting policies should be disclosed in one place as part of the financial statements, and not scattered in different placesCorrect
- BPolicies may be omitted if the auditor knows about them
- CPolicies need be disclosed only in the directors' report
- DOnly changed policies need be disclosed; unchanged policies never need disclosure
Explanation
AS 1 requires that disclosure of significant accounting policies form part of the financial statements and that the significant policies be disclosed in one place. The directors' report is not part of the financial statements, and policies that are unchanged still need disclosure. Auditor knowledge does not remove the requirement.
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